BROKERS AND TRANSPORTS LEAD MARKET DOWN -- JANUARY BAROMETER IN JEOPARDY

BROKERS BREAK DECEMBER LOW... Brokerage stocks continue to lead the market lower. The Broker/Dealer Index closed beneath its late-December low, and has turned its short-term trend decidedly lower. Last night, we showed Charles Schwab leading the brokerage fall. Merrill Lynch was one of today's biggest lossers. That brokerage bellwether broke its 200-day average on increasing volume -- and is bearing down on its December low. They say brokers lead the rest of the market. If that's so, today's brokerage action is bad news for the market.

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AIRLINES AND RAILS WEAKEN... Tranportation stocks were again among the market's biggest losers -- pulled down today by airlines and rails. The Airline Index has fallen under chart support to a three-month low. Rails were hit especially hard. CSX and Union Pacific both tumbled on heavy volume. CSX broke its November low. UNP broke moving average support.

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DOW THEORY DOESN'T LOOK GOOD... Dow Theorists won't take much comfort from the next two charts. The first one shows the Dow Transports crashing to a three-month low on rising volume. The second chart shows the Dow Industrials falling to within 60 points of its December low at 8250. Unfortunately, prices are falling on heavier volume. As a result, the On Balance Volume (OBV) line has already broken its December low. That greatly increases the odds that the Industrials will do the same shortly. It's not a good sign when the Industrials and Transports are falling together. Some of the Dow's biggest losers today were Eastman Kodak, General Motors, Caterpillar, JP Morgan Chase, and American Express.

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DOW LOSERS... We showed the big breakdown in EK at midday. Here are three of the other biggest losers. CAT and AXP have broken either chart or moving average support. GM is bearing down on its 50-day line after failing a test of resistance near 40. What all have in common is rising volume while prices are falling. That's not a good sign.

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GOLD STOCKS RISE... Gold prices gained almost $3.00 today, which boosted gold stocks. The XAU Index appears headed back up towards its early January peak. Rising gold stocks are consistent with a weaker stock market. Today's drop in the major stock indexes pretty much wipes out the gains scored earlier in the month. That puts the January Barometer in jeopardy. The final chart shows bond yields trading under their 50-day average. That's confirming weakness in stocks -- and reflects safe-haven buying of bonds.

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